Everyone who owns a smartphone or a computer has been confronted with the word Cloud. Some roughly know what it is and others use it without knowing that they are doing so. The average person might use it to store their photos to make room on their phone, while for some companies, the Cloud is a vector of innovation, productivity, and scalability. This is even truer for financial institutions where the Cloud has become an essential tool for their competitiveness.
The Cloud refers to servers where computer resources are stored that can be accessed via a communication network (Internet). The servers in the Cloud are hosted in data centers distributed worldwide. The use of cloud computing allows users and companies to free themselves from the need to manage physical servers or run software applications on their own equipment.
However, adopting a cloud strategy is not easy for banks and other financial players, as they operate in highly regulated environments. A legal framework must be adhered to. Their main responsibility is to manage their client’s assets. As a result, financial institutions are also responsible for the IT infrastructure that is the backbone of their business. They must therefore ensure that they have answers to a series of key questions relating to, among other things, the location of data and its control, respect for the confidentiality of private data, the traceability of operations, the chain of subcontractors, the resilience of systems, or even the consideration of an exit strategy vis-à-vis a supplier. In addition, cybersecurity processes must be put in place.
In addition, regulators are expressing concern that financial players are relying on an extremely limited number of cloud service providers. This puts their operational resiliency at risk. To prepare for potential real-world cloud outages and alleviate regulators’ concerns, banks should begin migrating to connected hybrid multicloud platforms that will allow them to take a more flexible approach to cloud migration.
Why turn to the cloud with all these challenges in mind? Because the cloud also has many advantages. It can fully automate the execution of many operations and reduce day-to-day operating expenses. It also allows the transfer of investment expenses in servers and data centers to operating expenses. It then becomes a pay-per-use model: users pay for what they use. On the other hand, the huge reserves of capacity that the major cloud players possess make it possible, for example, to have hundreds of servers working for an hour rather than a single server working for hundreds of hours for the same price, and thus achieve enormous efficiency gains. Finally, cloud services give companies a competitive advantage by providing them with cutting-edge technology.
Most market players are convinced that the future of the industry will be in the cloud. According to a study conducted by The Harris Poll & Google in 2021, the vast majority of financial services firms are already using some form of public cloud. Many financial services companies surveyed (83%) report that they are deploying cloud technology as part of their core IT infrastructures. Among those using cloud technology, the most popular architecture of choice is hybrid cloud (38%), followed by single cloud (28%) and multicloud (17%). Notably, of those surveyed who do not have a multicloud deployment, 88% said they are considering adopting a multicloud strategy in the next 12 months. As financial services firms continue to use the cloud, more core functionality can and will be migrated. While many financial services companies have migrated significant workloads to the cloud, the industry is far from adopting the cloud’s full capabilities. At the time of the survey, the level of cloud adoption for finance players was 54% in the US, 48% in the UK, 45% in France and 43% in Germany.
The future of financial players with the cloud seems to be the hybrid multi-cloud. This is the most popular choice according to the study. However, adopting a Cloud strategy is no guarantee of success. The Cloud must be an answer to a concrete problem. The company must first identify the models and solutions that best meet its specific wants and needs. Second, moving to the cloud means a complete cultural shift within the organization. Companies need a strategy that is consistent with goals, followed by a definition of risk management and governance requirements, and a financial analysis to justify the investment in the cloud.